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How to Take Payments Online

Learn how to accept credit and debit card payments online or via Direct Debit, and help mitigate the effects of the COVID-19 pandemic on your business

COVID-19 UPDATE:

On March 23rd, 2020, the UK government stepped up its measures to stop the spread of the novel coronavirus (COVID-19). Along with bars, pubs, cafes, and restaurants, the government also ordered the closure of all retail businesses (minus a few exceptions).

Even after the lockdown rules have been eased and most businesses could reopen, physical stores are typically experiencing less footfall than before the lockdown started. Moving your business online has become more important than ever. Read on for our advice on how to set your startup up with the ability to accept online payments, and continue trading during this difficult time.

Starting an online shop? Or, maybe you've set up a charity, and would love to gather donations digitally? Regardless, the same pressing question will apply: how to take card payments online.

The way you take payments online will depend on whether you’d like to accept card payments, Direct Debits, or both.

Direct Debit enables you to take agreed payments from your customer’s bank account. A customer can sign up to a Direct Debit using their bank account number and sort code.

A CPA (Continuous Payment Authority) is taken via a credit card – for which customers must supply you with their 16 digit card number to then be linked to your bank account.

Read on to find out which online payment method is best-suited to your business, and how you can get started.

Alternatively, furnish us with a few details about your business, and we'll match you with online payment providers that can help you scale. We'll just ask a few questions about the ecommerce solution you're looking to implement, and you'll receive quotes tailored to your startup, from handpicked merchant account providers.


How to take payments online: debit and/or credit card payments

If you’re looking to take card payments online, you’ve got two main options:

Read on for an explanation of both of these options…


Option 1: Set it up yourself

To DIY your card-accepting capabilities, you’ll need to follow these simple steps (assuming you’ve already set up your website):

  • Open a merchant account
  • Set up a payment gateway

Step 1: open a merchant account

A merchant account is a mandatory online bank account that temporarily holds the money a customer pays you while the payment is approved by said customer’s bank. It's not your business bank account… more like a waiting room, where funds go to to be authorised before they arrive in your account.

Merchant accounts are necessary for all businesses wishing to accept credit and debit card payments online. So how do you get one?

Most major banks offer merchant accounts, so you can start by talking to yours – though it’s worth remembering that your merchant account doesn’t have to be held with the same bank as your business account.

You also don't have to get a merchant account directly through a bank. You can also get a dedicated merchant account through an independent, third-party company called an ISO (Independent Service Organisation). These companies work with banks to provide you with merchant services, but tend to be cheaper, and offer superior customer support.

Some examples of ISOs in the UK are:

  • Worldpay
  • Handepay
  • takepayments (formerly Payzone)

Unfortunately, you can’t take payments online for free – merchant account providers can charge transaction fees, monthly minimum fees, authorisation fees and more (you can read more in our merchant accounts guide). With this in mind, we’d advise shopping around to find the contract that suits you best.


Step 2: set up a payment gateway:

A payment gateway connects your website to a payment processing network. It's a piece of software that helps secure and authenticate a transaction, capturing your customers’ card details and submitting the charge for settlement.

Payment gateways are typically included as ‘add-ons' that you can request once you're approved for a merchant account. However, you can also integrate your merchant account with a payment gateway from a third-party provider. This is more work, and in all likelihood means spending more money. However, if you're tech-savvy and eager enough, this approach offers more customisability, and a greater depth of features.

Popular examples of companies that provide payment gateways include:

  • PayPal
  • WorldPay
  • Amazon Pay
  • Sage Pay
  • Braintree
  • Authorize.Net

Payment gateways are often offered by merchant account providers as part of a ‘bundle', along with other services such as e-invoices, pay by link, and a virtual terminal, allowing you to take payments over the phone.

Some payment gateways are limited in terms of the types of cards they can accept and bank accounts they can work with, so it’s worth finding one that fits well with the way your customers tend to pay. Payment gateway fees can vary significantly across providers, too – so it goes without saying that you'll want to shop around.

Payment gateways typically cost a monthly fee (usually between £10 and £20), plus a per transaction fee rendered as a percentage of the value of each sale you accept through the gateway. Many providers also include a set amount of transactions included in the monthly fee, so you'll only pay a per sale fee if you exceed that limit.

Take a look at the table below for some examples of payment gateway prices.

Payment gatewayPrice
Worldpay£19.95 per month or 2.75% + 20p per transaction
PayPal2.9% + 30p per transaction
Sage Pay£20.90 + 0.74% per transaction
Handepay£19.99 per month + 10p per transaction (after 400 transactions)
Authorize.Net£19 per month + 10p per transaction
Braintree1.4% - 3.4% +20p per transaction

To find the right option for you, we’d recommend checking out our guide to the best payment gateways for small businesses, where you’ll find impartial reviews, prices and pros and cons.

Remember, if you’re going to accept card payments, then you need to be PCI compliant. This means you’ll need to store any data your business collects from cardholders totally securely using a hosting provider that complies with the Payment Card Industry Data Security Standard.


Option 2: use a payment facilitator (PayFac)

An payment facilitator (PayFac) is a company that provides merchant services for businesses, allowing them to accept credit and debit cards online, as well as in person and over the phone.

But what's the difference between that and what a dedicated merchant account does?

Well, rather than a dedicated merchant account service (meaning one that processes your business' payments only), PayFacs offer an aggregated merchant account. That means a PayFac ‘batches' your credit and debit card transactions together along with those of many other merchants, to be processed together.

This allows PayFacs to offer a service that's much cheaper for small businesses. PayFacs tend not to charge monthly or setup fees, while pricing typically comes as a fixed, flat rate percentage of each sale you make with a credit or debit card.

PayFacs also help relieve some of the burden of PCI compliance. All transactions are funnelled through these companies' own networks and channels, meaning you won't be personally handling any of your customers’ card details. Better still, PayFacs typically offer a setup process with minimal underwriting – some, such as Square, don't even run a credit check.

That makes them a solid option if your credit rating is less than ideal, but be warned – PayFacs have a very low tolerance for fraud. Accounts have been known to be suspended at the first sign of anything untoward, and are difficult to get back.

Some popular examples of payment facilitators include:

Payment facilitatorOnline transaction feeRead more  
SumUp2.95% + 20pSumUp
iZettle2.5%iZettle
Stripe1.4% + 20pStripe
PayPal2.9%PayPal
Square2.5%Square

Take Direct Debit payments online

A Direct Debit payment means that your business is given permission to take an amount of money out of a customer’s bank account at regular intervals – typically monthly – without the need for the customer to supply their details again after the first instance.

A Direct Debit doesn’t have to come to the same amount every month, but you’re obliged to let your customer know how much their next payment will be, and when it’ll come out of their account.

Whilst Direct Debits aren’t right for businesses that ask for a one-time charge and call for pretty instantaneous payments – like online shops, for example – they do work really well for things like recurring subscription payments (at the gym, for example), regular charitable donations and B2B invoicing.


Step one: Join the UK Direct Debit scheme

In order to take Direct Debits online via your website, you’ll first need to join the Direct Debit scheme, which is run by an organisation called Bacs.

The first step to take is to speak to your bank. From there, you’ll undergo a series of checks, confirming your integrity, your financial standing, and your administrative capabilities. If the results are satisfactory, you’ll be accepted onto the scheme.

Your bank will advise on what your business specifically will need to do before it can offer Direct Debits to customers.


Step two: Decide how you’ll submit Direct Debit payments

Put simply, to take Direct Debit payments from customers, you’ll submit payment files – which detail your customers’ bank account numbers and sort codes, payment amounts, and relevant dates – to the Bacs system.

Bacs then sends the data to your customers’ banks, which then approve and organise the payments.

There are two ways to submit these files to Bacs:

  1. Directly, yourself. The cheaper option, Bacs recommends this for larger businesses with more payments to process
  2. Via a Direct Debit bureau. Bacs recommends this for smaller businesses with limited numbers of payments to process

Read on for an explanation of both of these options.


Option 1: Submit payment files directly yourself

In order to do this, you will need:

  • Your own SUN (Service User Number)
  • Bacs-approved Bacstel-IP software

A SUN is a unique six-digit number which basically acts as a license for you to start managing your Direct Debit payments yourself.

You can obtain a SUN from your bank, so when you consult them about joining the Direct Debit scheme, you should also talk to them about getting your own SUN.

Bacstel-IP: The secure channel through which you can submit payments directly into the Bacs system.

You’ll need to install Bacstel-IP software that has been approved by Bacs. This will allow you to submit Direct Debit payment files to the Bacs system.

Examples of Bacs-approved Bacstel-IP software include:

  • AccessPay
  • Bottomline Technologies
  • Cashbook Ltd
  • Elseware
  • Interbacs
  • Smarterpay
  • WPM

These are just a few examples – you can find a list of approved software on Bacs’ website, here.


Option 2: Use a Direct Debit bureau

A Direct Debit bureau is a third party which handles Direct Debit payments on your behalf. They can do this using either your SUN or their own, meaning a bureau can be a great option for businesses who’ve been denied a SUN by their bank.

Though using a bureau costs more than handling the payments yourself, Direct Debit bureaus tend to be recommended to businesses who:

  • Have a relatively small turnover
  • Process a fairly small number of Direct Debits each month
  • Have inexperienced payment systems that haven’t been worn in yet

A free directory of Bacs-approved Direct Debit bureau can be downloaded from this page of Bacs’ website.


Which method of taking payments online is right for me?

There are a few things to keep in mind when choosing the right online payment platform for your business.

Remember these five points to make sure you’re making the most informed decision possible:

  1. Security
    Ensure the payment gateway you choose features SSL and 128 Bit encryption, as well as having a digital signature and a Dynamic IP address. These security layers will ensure that you and your customer’s money is as safe as can be.
  2. Hosted or integrated
    A hosted payment gateway is cheaper, more simple to set up, and makes it easier to maintain PCI compliance. However, it can be tough to customise to it fit the unique look and feel of your website. An integrated payment gateway, on the other hand, connects your ecommerce site to a payment processor via API integration. This is a more difficult approach, but inherently customisable. It can also be better for your conversion rates, because customers won't have to leave your website to input information and submit orders.
  3. The customer experience
    Your customer’s journey from selection to payment completion is really important. Too many steps and not enough clarity could really jeopardise a sale, so make sure the payment gateway is as clear and simple as possible.
  4. Fees
    Each gateway has a different fee structure – make sure this is in-line with your budget and sales habits.
  5. Customer support
    Technical problems could really put a dent in your revenue. Does your provider offer 24/7 support, or just during regular working hours? Check to see if the support you need will be there as and when you need it.

A summary of the main points on how to take payments online

  • Open a merchant account – a mandatory online bank account that holds a consumer's money while the payment is approved by the customer’s bank
  • Set up a payment gateway – this connects your website to a payment processing network securely
  • Use a payment facilitator (PayFac) – a company that provides all the merchant services you need to take payments online
  • Join the UK Direct Debit scheme –this is the first step to being able to take direct debits for your business online
  • Decide how you’ll submit Direct Debit payments – either submitting payment files directly yourself or using a Direct Debit bureau

Accepting online payments: What's next?

We’ve covered how to upgrade your website to accept card payments – be it by doing it yourself or by using a payment service provider – as well as providing instructions on how to take Direct Debit payments.

If you’re keen to take card payments online, take a look at our guide to the six best payment gateways on today’s market.

We’d also suggest providing us with a few details about your business. Tell us what you’re looking for in a merchant account – including how much you expect to process in card payments, and your postcode – and you’ll receive tailored quotes from selected merchant account providers.


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